IFRS 16 - Are yourRunning out of time? - KPMG Nederland
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IFRS 16 - Are you running out of time?

IFRS 16 - Are you running out of time?

IFRS 16 introduces new detailed guidance on how to account for leases. With an effective date of 1 January 2019, preparation time is now limited. How to get to the finish line in time.

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IFRS 16 introduces new detailed guidance on how to account for leases. With an effective date of 1 January 2019, preparation time is now limited.

While some companies may not need to report under IFRS 16 until the end of their 2019 financial year, others will be required within the first few months, especially those providing interim IFRS financial information to stakeholders, such as banks, lenders, and shareholders.

To be ready for IFRS 16 we expect all reporters to employ a form of tooling, whether that be a spreadsheet model or a dedicated piece of software.

Do not underestimate the implementation challenge

Many of the bigger ERP system providers have released leasing modules that can handle the new lease accounting standard. Multiple smaller, bolt-on solutions are also available in the market place.

We have noticed that some software packages may not have the capability of modelling all (transition) options and accounting policy choices that can be made under the new standard. In some cases, companies may find themselves more involved in guiding the software providers than expected. Significant time can be required to test the system and refine the setup and configuration to ensure the output is compliant with IFRS 16.

How can KPMG support you with your transition?

KPMG can help you in getting to the finish line with:

  • the implementation of a solution,
  • data extraction
  • technical accounting questions - how to determine the discount rate under IFRS 16
  • process and controls
  • general project guidance

KPMG offers a range of tooling solutions

Four options are available to run your lease calculations in time:

  1. KPMG can support you in calculating the transition balances of the right of use asset and lease liability using a net present value calculation in Excel, to ensure you have the required quantitative information in your disclosure on future effective standards in your 2018 financial statements.
  2. KPMG offers an Excel Modelling Tool* which is 'off the shelf' and ensures fast deployment. In addition to being an interim solution or even the main accounting tool going forward, this tool supports the budgeting and forecasting process.
  3. The KPMG Lease Portfolio Manager* is an on premise solution which is customizable for integration into your current architecture. In addition to project management, the tool functions as a central repository of key lease information and documentation, provides IFRS 16 calculations and encompasses business intelligence reporting to manage critical dates and run scenario analysis. 
  4. If you are looking for a longer-term solution which can handle thousands of leases, complex group structures and multiple users at the same time KPMG offers the KPMG Leasing Tool*. In combining KPMG's expertise with IBM's technology platform, the KPMG Leasing Tool offers a compelling solution that can account for leases under both IFRS 16 as well as ASC 842.

*Details are available on request

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